MAIN, GERMANY / ACCESSWIRE / July 24, 2017 / Pro-Trader Daily takes a look at the latest corporate events and news making the headlines for Quanta Services, Inc. (NYSE: PWR), following which we have published a free report that can be viewed by signing up at http://protraderdaily.com/optin/?symbol=PWR. The Company completed the acquisition of Stronghold Ltd and Stronghold Specialty Ltd (Stronghold), a prominent specialized services Company that provides high pressure and critical path solutions to the downstream and midstream energy markets on July 20, 2017. Stronghold, which is headquartered in La Porte, has a robust presence in the strategically important Gulf Coast refinery and petrochemical market and serves almost all the regions of the United States. For immediate access to our complimentary reports, including today's coverage, register for free now at:

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A Strategic Expansion for Quanta

Duke Austin, President and Chief Executive Officer of Quanta Services, was positive about Quanta's 2017 and multiyear outlook. He believes that the acquisition of Stronghold is a strategic move and anticipates that Stronghold's operations can soon achieve double-digit growth driven by positive industry dynamics, visible cross-selling opportunities and Quanta's relentless support. In fact, he welcomed Stronghold's employees to the Quanta family.

Strategic benefits from the deal include the following:

  1. The acquisition will allow Quanta capture a greater share of the energy industry's operating and capital spend; and also offer cross-selling opportunities. It will create an opportunity to expand Stronghold's services to Quanta customers and vice versa. It will also enable Quanta to offer turnkey high voltage power and turnaround services, which are two most critical components of turnarounds.
  2. The specialized Industrial Services market is a natural as well as strategic service line expansion for Quanta. It will help the Company meet and exceed its customers' needs. Stronghold's operations will be reflected in Quanta's Oil and Gas Infrastructure services segment.
  3. The acquisition of Stronghold will provide Quanta an extensive presence in downstream services. Stronghold's downstream services compliment Quanta's strong midstream services capabilities.
  4. Stronghold's multigenerational, successful and experienced management team will put Quanta on a strong platform for growth. Stronghold also has a strong cultural fit with Quanta in terms of its dedication to quality, customer service, etc.
  5. The Company is also expected to benefit from Stronghold's strong financial profile. Stronghold generated revenues of around $500 million in 2016 and has a workforce of about 2,800 employees. Stronghold's recurring revenues, accretive operating income margin profile, low CapEx requirement, and strong free cash flow align well with Quanta's strategic imperative for long-term profitable growth.

Quanta's acquisition of Stronghold portfolio of services is a move to take advantage of increased energy production trends in the US.

Consideration - a Mix of Cash and Stock

  • The consideration for the transaction includes an upfront payment of around $450 million, comprising of $360 million in cash and 2.7 million in shares of Quanta Services common stock valued at around $90 million.
  • The common stock comes with a cash and stock earn-out that could generate a maximum additional consideration of $100 million if cumulative three-year EBITDA targets are achieved.

Financial Implications of the Deal

  • The acquisition of Stronghold is expected to produce $6.0 million to $7.5 million of net income attributable to common stock in the remainder of 2017.
  • The acquisition is also expected to be accretive to Quanta's GAAP diluted earnings per share (attributable to common stock) by $0.02 to $0.03 and to non-GAAP adjusted diluted earnings per share by $0.06 to $0.07, with accretion expected to increase in 2018.

Adjusted diluted earnings per share (attributable to common stock) is calculated by adjusting net income (attributable to common stock) to account for all net of tax: $3.0 million to $4.0 million of acquisition and integration costs, $2.0 million to $2.5 million of amortization expense (for Stronghold's intangible assets), and approximately $0.5 million of non-cash stock-based compensation expense. However, it must be noted that the allocation of the purchase price is preliminary and subject to change.

No Changes in Stronghold's Management

There will be no change in Stronghold's existing management team wherein founder Joe Durham will continue his leadership role as the Chief Executive Officer. Owing to its skilled and dedicated workforce, Stronghold will serve as a platform-operating unit of Quanta.

Financial and Legal Advisors

Harris Williams & Co. acted as the financial advisor for Quanta for the transaction, while Baker Botts L.L.P. served as its legal advisor.

About Quanta Services

Quanta Services is a prominent contracting services Company, delivering infrastructure solutions for the electric power, oil and gas, and communications industries. Its comprehensive services include designing, installing, repairing and maintaining energy, and communications infrastructure. With operations throughout the United States, Canada, Latin America, Australia, and select other international markets, Quanta has the manpower, resources and expertise to safely complete projects that are local, regional, national or international in scope.

Last Close Stock Review

On Friday, July 21, 2017, the stock closed the trading session at $33.05, marginally up 0.92% from its previous closing price of $32.75. A total volume of 2.14 million shares have exchanged hands, which was higher than the 3-month average volume of 1.67 million shares. Quanta Services' stock price soared 5.86% in the last one month and 30.02% in the previous twelve months. The stock is trading at a PE ratio of 22.58 and currently has a market cap of $5.05 billion.

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